In the first few days of jockeying for position in the Federal Communications Commission’s auction of advanced wireless services spectrum, T-Mobile USA Inc. has been battling to expand its footprint, and the bidding groups of cable and satellite providers appear to be trying to capture enough spectrum for national networks.
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T-Mobile USA came out swinging in the first round. As of round eight, T-Mobile was the high bidder, touching 31 licenses for about $1.1 billion-including five of the six large 20-megahertz regional licenses.
Wireless DBS Inc., which is backed by satellite TV providers DirecTV Group Inc. and EchoStar Communications Corp., was the high bidder on 4 licenses for $141 million at the end of last week. At one point, the satellite companies were the high bidders in each of the six regions of the continental United States, plus additional spectrum in Alaska, Hawaii and the New York City metro area. As of round eight, however, they were only on top in spectrum blocks in Alaska, the Mississippi Valley and the Great Lakes region.
Meanwhile, the joint venture between Sprint Nextel Corp. and four cable companies was going after significant swathes of spectrum around the country. The JV in round seven was the top bidder on licenses covering the nation’s midsection and the Northeast, although it had no high bids on spectrum in the West or Southeast. In round eight, that flip-flopped, and the company ended the week with high bids on spectrum in the Southeast, West and Central regions, as well as Hawaii.
Top bidders have largely followed analysts’ expectations, particularly on the wireless side.
“T-Mobile, obviously everyone was expecting,” said Ranjan Mishra, director in the Communications, Information & Entertainment practice at Mercer Management Consulting. “They have to get new spectrum if they want to do 3G deployment.”
Mishra added that in terms of strategy, different companies are likely to place value on markets other than the traditionally highly sought-after areas of Los Angeles and New York. While Verizon Wireless and Cingular Wireless L.L.C. may seek to fill holes in their coverage, for example, Leap Wireless International Inc. would be more likely to seek out markets adjacent to its existing ones, he said.
The Great Lakes regional license, which covers about 60 million potential customers, garnered the highest bid in each round until round eight, and changed hands each time. In the various rounds, companies ranging from Verizon Wireless to T-Mobile USA to bidding companies backed by U.S. Cellular Corp. and NextWave Wireless L.L.C.-yes, that NextWave-have temporarily had the high bid on the license; after eight rounds of bidding, the license was back in Leap’s possession-at least for the time being.
The F-block licenses have traded hands most frequently and are the most desirable of the auction due to their size; they divvy up the country into six large regions with 20 megahertz of spectrum apiece. The D- and E-block licenses cover the same six regions, but only offer 10 megahertz of spectrum. B-and C-block licenses offer 20-megahertz and 10-megahertz chunks of spectrum, respectively, in 176 smaller so-called “economic areas” in the 50 states, the District of Columbia, Guam, Puerto Rico, the American Virgin Islands, American Samoa and the Gulf of Mexico. A-block licenses are for 20 megahertz of spectrum in 734 tiny geographic markets.
Still, with the auction expected to last between one and three months, the competition is in its early stages.
“We think that many carriers are still determining the landscape at this point,” noted Bear Stearns analyst Phil Cusick in a research note on the auction, pointing out that Cingular and Verizon Wireless have been fairly cautious in their bidding, while T-Mobile USA has been very aggressive.
Verizon Wireless has only been bidding on spectrum that covers large areas of the country, while Cingular has bid on large blocks as well as spectrum in particular markets, including the Chicago metro area, Miami-Fort Lauderdale, Minneapolis-St. Paul and the New York metro area. Neither company, however, has placed more than a handful of high bids in any given round.
Regional wireless operators Leap and MetroPCS Communications Inc. have been active bidders, as expected. By round eight, MetroPCS was hanging on to just two licenses-but they were sizable 10-megahertz blocks covering the Western and Great Lakes regions. Leap, meanwhile, had no high bids as of round seven, but retook the Great Lakes F-block license in round eight. “We expect these two to focus more on specific areas as prices rise,” Cusick added.
NextWave-backed bidder AWS Wireless Inc. poked its head up in the sixth round, taking the high bid on the coveted Great Lakes region F-block license. By the next round, however, NextWave was off the radar with no high bids.
Among smaller wireless providers:
- U.S. Cellular’s bidding entity, American Cellular, has shown interest in licenses covering Kansas City, Mo., Dallas-Ft. Worth and the Colorado cities of Denver, Boulder and Colorado Springs.
- Centennial Communications Corp. was vying for nearly a dozen licenses in Indiana, Louisiana and Michigan.
- Cellular South was chasing more than a dozen licenses covering portions of Alabama, Florida and Tennessee.
